Tech Data 2014 Annual Report Download - page 30

Table of Contents
On an absolute dollar basis, the provision for income taxes decreased 34.7% to $46.4 million in fiscal 2013 compared to $71.1 million in fiscal
2012. The change in the provision for income taxes is primarily due to the relative mix of earnings and losses within certain countries in which
we operate and the adjustments to income tax reserves and valuation allowances discussed above.
To the extent we generate future consistent taxable income within those operations currently requiring valuation allowances, the valuation
allowances on the related deferred tax assets will be reduced, thereby reducing tax expense and increasing net income in the same period. The
underlying net operating loss carryforwards remain available to offset future taxable income in the specific jurisdictions requiring the valuation
allowance, subject to applicable tax laws and regulations.
The effective tax rate differed from the U.S. federal statutory rate of 35% during fiscal 2014, 2013 and 2012, due to the relative mix of earnings
or losses within the tax jurisdictions in which we operate and other adjustments, including: i) losses in tax jurisdictions where we are not able to
record a tax benefit; ii) earnings in tax jurisdictions where we have previously recorded valuation allowances on deferred tax assets; iii) the
reversal of income tax reserves; iv) changes to valuation allowances recorded on deferred tax assets; and (v) earnings in lower-tax jurisdictions
for which no U.S. taxes have been provided because such earnings are planned to be reinvested indefinitely outside the United States.
The overall effective tax rate will continue to be dependent upon the geographic distribution of our earnings or losses and changes in tax laws or
interpretations of these laws in these operating jurisdictions. We monitor the assumptions used in estimating the annual effective tax rate and
make adjustments, if required, throughout the year. If actual results differ from the assumptions used in estimating our annual income tax rates,
future income tax expense could be materially affected.
Our future effective tax rates could be adversely affected by lower earnings than anticipated in countries with lower statutory rates, changes in
the relative mix of taxable income and taxable loss jurisdictions, changes in the valuation of our deferred tax assets or liabilities or changes in tax
laws or interpretations thereof. In addition, our income tax returns are subject to continuous examination by the Internal Revenue Service and
other tax authorities. We regularly assess the likelihood of adverse outcomes from these examinations to determine the adequacy of our
provision for income taxes. To the extent we prevail in matters for which accruals have been established or are required to pay amounts in excess
of such accruals, our effective tax rate could be materially affected.
Net income attributable to noncontrolling interest
Net income attributable to noncontrolling interest was $6.8 million and $10.5 million, respectively, in fiscal 2013 and 2012. In September 2012,
the Company completed the acquisition of Brightstar's fifty percent ownership interest in our European joint venture. Net income attributable to
noncontrolling interest represents Brightstar's portion of the operating results of our European joint venture prior to the Company’
s acquisition in
September 2012.
Impact of Inflation
During the fiscal years ended January 31, 2014, 2013 and 2012, we do not believe that inflation had a material impact on our consolidated results
of operations or on our financial position.
Quarterly Data—Seasonality
Our quarterly operating results have fluctuated significantly in the past and will likely continue to do so in the future as a result of currency
fluctuations and seasonal variations in the demand for the products and services we sell. Narrow operating margins may magnify the impact of
these factors on our operating results. Recent historical seasonal variations have included an increase in European demand during our fiscal
fourth quarter and decreased demand in other fiscal quarters, particularly quarters that include summer months. Given that the majority of our net
sales are derived from Europe, our consolidated results closely follow the seasonality trends in Europe. The seasonal trend in Europe typically
results in greater operating leverage, and therefore, lower SG&A as a percentage of net sales in the region and on a consolidated basis during the
second semester of our fiscal year, particularly in our fourth quarter. Additionally, the life cycles of major products, as well as the impact of
future acquisitions and divestitures, may also materially impact our business, financial condition, or results of operations (see Note 15 of Notes
to Consolidated Financial Statements for further information regarding our quarterly results).
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